I took the opportunity last week to simultaneously buy into the stock market and re-allocate my assets.
I have been contemplating acquiring a greater bond position since I have been reading Tony Robbins Money: Master the Game.
Note: I am making progress on my book goals (3/8)!
For the past 13 years, I have contributed ~50% of my income to high-risk investments; primarily equities. This approach has worked well, especially since I increased my contributions through the recession of 2008/2009 and beyond.
As I approach early retirement, my risk tolerance has decreased and my desire to preserve wealth has increased.
Even so, I still have a need and desire for growth. I have settled on an 80/20 stock to bond (& cash) allocation. My timing could have been better seeing how we are in what seems to be a market correction.
After market gains of over 20% in 2017, I still view the conversion to 20% bonds as a good move, despite the market drop in February. Additionally we are still buying over $6,000 in stocks every month. If we are lucky, this “correction” will take a few months to recover, enabling us to buy more stocks “on sale”.
Going forward, I plan to stick with this allocation as part of our long-term strategy.
After FIRE, the bond and cash allocation will serve as an alternative to withdrawing from our principal. I plan to keep at least 3 years of living expenses in this security bucket.
Although asset allocation is very important for financial strength, diversification of assets is also essential. I primarily invest in the low-cost index funds for the total stock and bond market. As a result, diversification is automatically built in as the losers get absorbed by the winners.
However, we also own rental property and a business asset that provides additional income (with the potential to earn more).
These are the elements that give our total portfolio strength. We are not “recession-proof”, but with the greater bond position and diverse asset classes, we now have flexibility on how we “create income” when we need it in 1-3 years.
I have collected quite a list of blogs that publish their monthly expenses. A “New*” next to a blog indicates that it is a new addition to the Church of FI, not a new blog necessarily. Some of these blogs combine their net worth and expense reports. I like to compare my spending to these reports and try to improve where I can. Here is the lowdown on January (published in February).
Dividends Down Under (Savings Update)
Frugal Momster (expense report)
Gen Y Finance Guy
Enough time to
The Origami Life
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